PHILLIP TREASURY FUND Annual Report Year ended 31 … · 2 days ago · Statement of Total Return FS1 Statement of Financial Position FS2 ... Portfolio of investments 197,505,440

PHILLIP TREASURY FUND

Annual Report Year ended 31 March 2018

Contents

Page

Directory 1

Manager's Investment Report 2

Report to Unitholders 3

Report of the Trustee 8

Statements by the Manager 9

Independent auditors' report 10

Statement of Total Return FS1

Statement of Financial Position FS2

Statement of Movements in Unitholders' Funds FS3

Statement of Portfolio FS4

Notes to the Financial Statements FS9

Important Information FS18

1

Phillip Treasury Fund

MANAGER

Phillip Capital Management (S) Ltd

250 North Bridge Road

#06-00 Raffles City Tower

Singapore 179101

(Company Registration No. 199905233W)

DIRECTORS OF THE MANAGER

Lim Hua Min

Jeffrey Lee Chay Khiong

Linus Lim Wen Sheong

Lee Ken Hoon

Lim Wah Sai

Louis Wong Wai Kit

TRUSTEE & REGISTRAR

BNP Paribas Trust Services Singapore Limited

20 Collyer Quay, #01-01

Singapore 049319

(Company Registration No. 200800851W)

CUSTODIAN AND FUND ADMINISTRATOR

BNP Paribas Securities Services Singapore Branch

20 Collyer Quay, #01-01

Singapore 049319

(Company Registration No. T08FC7287D)

AUDITORS

KPMG LLP

16 Raffles Quay #22-00

Hong Leong Building

Singapore 048581

SOLICITORS TO THE MANAGER

Chan & Goh LLP

50 Craig Road, #03-01

Singapore 089688

SOLICITORS TO THE TRUSTEE

Dentons Rodyk & Davidson LLP

80 Raffles Place

#33-00 UOB Plaza 1

Singapore 048624


2

MANAGER'S INVESTMENT REPORT

The US Dollar Money Market Fund returned 1.11% (bid-to-bid basis) over the one year ended 31 March

2018, 44 basis points (“bps”) higher than the corresponding period last year. The Fund underperformed

the average 1-week US$ Libor benchmark rate of 1.25% over the same period.

As at 31 March 2018 the portfolio’s Weighted Average Maturity (“WAM”) stood at 55 days. Cash,

bonds and deposits maturing within one month accounted for approximately 13% of the portfolio value.

The portfolio remains well-diversified across countries, sectors and issuers, with debt issues in financial

services constituting the largest portfolio allocation (non-deposit investments) at 25%.

10-year US treasury yields ended at 2.74% on 29 March 2018, representing a 35 bps increase from the

2.39% a year ago, as the US Federal Reserve implemented three quarter-point increases to bring the

overnight funds rate to a target range of 1% to 1.75%. The 25bps increment in March 2018 represents

the sixth rate hike since the Federal Open Market Committee first started raising Federal Fund rates in

December 2015. Strengthening economic conditions, solid hiring data and firmer inflation have

reinforced the case for the Federal Reserve to tighten monetary policy further although the Federal

Reserve maintained that the hiking trajectory will be gradual.

The United States Department of Commerce reported in late May that GDP grew at an annual rate of

2.2% during the first quarter of 2018, slightly lower than previously reported (2.3%). The revision was

due to downward revisions to inventory investment and consumer spending. However, the growth

outlook remains favourable against the backdrop of a tightening labour market and fiscal stimulus in

the form of the US$1.5 trillion income tax cut package that came into effect as of January 2018. The

effects of lower corporate and individual tax rates and higher government spending will be bring annual

GDP growth closer to the Trump administration’s 3% target. Optimism surrounding GDP growth

momentum was supported by April’s economic data which saw solid consumer spending, business

capital investments and industrial production.

Although the meeting minutes for the Federal Open Market Committee in May acknowledged the

strong economic conditions, the central bank also recognised the possibility of rising global trade and

geopolitical tension. The Federal Reserve indicated tolerance for inflation rates to temporarily exceed

its 2% target, believing that it will aid in anchoring longer-run inflation expectations. Market

participants mostly expect a gradual pace of Fed rate hikes – two additional increases in 2018, while

not ruling out the possibility of a fourth for the calendar year. Macro risks to consider for the second

half of 2018 include monetary policy normalisation in the US and Europe, US trade protectionism and

rising global energy prices.

Our strategy remains to buy and hold high-quality securities to maturity and manage interest rate risk

with a portfolio of target WAM at 90 days. Our liquidity strategy is to have overnight and weekly

liquidity of 10% and 20% respectively, for the portfolio. We will continue with prudent management

of concentration and liquidity risks with a wide diversification of issuers and banks for the portfolio.

Phillip Treasury Fund Report to Unitholders Year ended 31 March 2018

3

The following contains additional information relating to the US Dollar Money market Fund (the "Sub Fund"):

1. Distribution of investments

Please refer to the Statement of Portfolio on pages FS4 to FS8.

2. Schedule of investments by asset class

Asset class

Fair value at

31 March 2018

US$

Percentage of

total net assets

attributable to

unitholders at

31 March 2018

%

Fixed Income Securities 125,279,790 59.09

Term Deposits 72,225,650 34.06

Cash and cash equivalents 22,974,532 10.84

Other net liabilities (8,459,291) (3.99)

212,020,681 100.00

Types of money market instruments and debt securities

Asset class

Fair value at

31 March 2018

US$

Percentage of

total net assets

attributable to

unitholders at

31 March 2018

%

Floating rate notes 14,452,137 6.82

Fixed rate notes 110,077,963 51.92

Accrued interest on debt securities 749,690 0.35

125,279,790 59.09

3. Credit rating

i) Debt securities

Credit Ratings

Fair value at

31 March 2018

US$

Percentage of

total net assets

attributable to

unitholders at

31 March 2018

%

AA 9,996,947 4.71

A 61,233,988 28.89

Aaa* 398,724 0.19

Aa* 8,623,717 4.06

A3* 9,419,171 4.44

NR 34,857,553 16.45


Total 125,279,790 59.09


4

3. Credit rating (continued)

ii) Fixed deposits

Credit Ratings

Fair value at

31 March 2018

US$

Percentage of

total net assets

attributable to

unitholders at

31 March 2018

%

A 33,065,867 15.60

A-# 21,113,990 9.96

AA- 18,045,793 8.50

Total 72,225,650 34.06

Source of the credit rating is from Standard & Poor’s except the following:

* Credit rating is from Moody’s # Credit rating is from Fitch

4. Top 10 holdings

10 largest holdings at 31 March 2018

Fair value at

31 March 2018

US$

Percentage of

total net assets

attributable to

unitholders at

31 March 2018

%

Sinopec Capital 2013 Limited 1.875% due 24/04/2018 11,658,351 5.50

Agricultural Bank Of China Limited/Singapore 0% due

10/05/2018 9,977,594 4.71

Intesa Sanpaolo 0% due 13/06/2018 9,953,032 4.69

Cooperative Rabobank UA/Hong Kong 0% due

13/08/2018 9,927,756 4.68

Harvest Operations Corporation 2.125% due 14/05/2018 8,397,277 3.96

Want Want China Finance Limited 1.875% due

14/05/2018 7,989,280 3.77

Japan Bank For International Cooperation 1.75% due

13/11/2018 7,968,800 3.76

Woori Bank 2.875% due 02/10/2018 6,344,603 2.99

Macquarie Bank Limited 2.63557% due 26/03/2019 6,000,000 2.83

State Grid Overseas Investment 2013 Limited 1.75% due

22/05/2018 5,491,530 2.59

83,708,223 39.48


5

4. Top 10 holdings (continued)

10 largest holdings at 31 March 2017

Fair value at

31 March 2017

US$

Percentage of

total net assets

attributable to

unitholders at

31 March 2017

%

CMT MTN Private Limited 3.731% due 21/03/2018 9,555,006 5.19

Mizuho Bank Limited 1.55% due 17/10/2017 6,645,544 3.61

Harvest Operations Corporation 2.125% due 14/05/2018 6,260,817 3.40

Korea Development Bank 3.5% due 22/08/2017 5,536,080 3.01

State Grid Overseas Investment 2013 Limited 1.75% due

22/05/2018 5,482,235 2.98

Westpac Banking Corporation 2% due 14/08/2017 5,010,150 2.72

Bank Of Communications Company Limited 0%

08/09/2017 4,962,766 2.70

Hutchison Whampoa International 14 Limited 1.625% due

31/10/2017 4,296,517 2.33

KEB Hana Bank 3.5% due 25/10/2017 4,032,840 2.19

Advance Wisdom Investments Limited 2.1% due

16/10/2017 3,852,233 2.09

55,634,188 30.22

5. Maturity Profile of Investments

Fair value at

31 March 2018

US$

Percentage of

total net assets

attributable to

unitholders at

31 March 2018

%

Up to 30 days 26,763,268 12.62

31 - 90 days 72,708,280 34.31

91 - 180 days 59,990,272 28.29

181 - 365 days 30,661,937 14.46

366 - 732 days 6,631,993 3.12

Non-interest bearing 749,690 0.35

197,505,440 93.15

6. (i) Exposure to derivatives as at 31 March 2018

Nil

(ii) Gain/Loss on derivative contracts realised for the year ended 31 March 2018

Nil

(iii) Net gain/loss on outstanding derivative contracts marked to market as at 31 March 2018

Nil


6

7. Global exposure to financial derivatives

The global exposure relating to derivative instruments is calculated using the commitment approach. The

global exposure of the sub-fund is calculated as the sum of:

a. the absolute value of the exposure of each individual financial derivative not involved in netting or

hedging arrangement;

b. the absolute value of the net exposure of each individual financial derivative after netting or hedging

arrangements; and

c. the sum of the values of cash collateral received pursuant to:

i. the reduction of exposure to counterparties of OTC financial derivatives; and

ii. EPM techniques relating to securities lending and repurchase transactions,

and that are reinvested.

8. Collateral

Nil.

9. Securities lending or repurchase transactions

Nil.

10. Amount and percentage of total fund size invested in other unit trusts, mutual funds and collective

investment

Nil

11. Amount of units created and cancelled for the year

2018

US$

Units created 630,632,588

Units cancelled (604,918,991)

12. Turnover ratio

Please refer to Note 10 of Notes to Financial Statements.

13. Expense ratio



7

14. Performance of the Fund

As at 31 March 2018 Performance of the

Fund

Benchmark

performance

Cumulative (%)* US$ US$

3 months 0.33% 0.38%

6 months 0.61% 0.70%

1 year 1.11% 1.25%

3 years 2.28% 2.04%

5 years 3.49% 2.30%

Since inception (6 May 2009) 6.60% 3.18%

Annualised (%) US$ US$

1 year 1.11% 1.25%

3 years 0.76% 0.67%

5 years 0.69% 0.46%

Since inception (6 May 2009) 0.72% 0.35%

Note:*Cumulative returns are in US dollars calculated on a bid to bid basis, with net dividends

reinvested Benchmark: 1-week US$ Libor (Source: Bloomberg)

15. Related party transactions


16. Any other material information that will adversely impact the valuation of the Fund

Nil

17. Soft dollar commissions

The Manager will comply with applicable regulatory and industry standards on soft-dollars.

The soft-dollar commissions which the Manager may receive include research and advisory

services, economic and political analyses, portfolio analyses including valuation and

performance measurements, market analyses, data and quotation services, computer hardware

and software or any other information facilities to the extent that they are used to support the

investment decision making process, the giving of advice, or the conduct of research or

analysis and custodial service in relation to the investments managed for clients. The soft

dollar credits utilised are not allocated on a specific client basis. The brokers also execute

trades for other funds managed by the Manager.

The Manager will not accept or enter into soft dollar commissions or arrangements unless

such soft-dollar commissions or arrangements would, in the opinion of the Manager, assist

the Manager in its management of clients' funds, provided that the Manager shall ensure at all

times that transactions are executed on the best available terms taking into account the relevant

market at the time for transactions of the kind and size concerned, and that no unnecessary

trades are entered into in order to qualify for such soft-dollar commissions or arrangements.

The Manager does not, and is not entitled to, retain cash rebates for its own account in respect

of rebates earned when transacting in securities for account of clients' funds.

The Manager did not receive any soft dollar commissions during the year.


Report of the Trustee

Year ended 31 March 2018

8

Report of the Trustee

The Trustee is under a duty to take into custody and hold the assets of Phillip Treasury Fund in

trust for the unitholders. In accordance with the Securities and Futures Act (Chapter 289), its

subsidiary legislation and the Code on Collective Investment Schemes, the Trustee shall monitor

the activities of the Manager for compliance with the limitations imposed on the investment and

borrowing powers as set out in the Trust Deed in each annual accounting period and report thereon

to unitholders in an annual report.

To the best knowledge of the Trustee, the Manager has, in all material respects, managed Phillip

Treasury Fund during the period covered by these financial statements, set out on pages FS1 to

FS17, in accordance with the limitations imposed on the investment and borrowing powers set

out in the Trust Deed.

For and on behalf of the Trustee

BNP Paribas Trust Services Singapore Limited

──────────────────────────────

Authorised signatory

26 June 2018


Statement by the Manager


9

Statement by the Manager

In the opinion of the directors of Phillip Capital Management (S) Ltd, the accompanying financial

statements set out on pages FS1 to FS17, comprising the Statement of Total Return, Statement of

Financial Position, Statement of Movements of Unitholders’ Funds, Statement of Portfolio and

Notes to the Financial Statements are drawn up so as to present fairly, in all material respects, the

financial position of Phillip Treasury Fund as at 31 March 2018, and the total return and

movements in unitholders’ funds for the year then ended in accordance with the recommendations

of Statement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts”

issued by the Institute of Singapore Chartered Accountants. At the date of this statement, there

are reasonable grounds to believe that Phillip Treasury Fund will be able to meet its financial

obligations as and when they materialise.

For and on behalf of directors of the Manager

Phillip Capital Management (S) Ltd

────────────────────────────

Jeffrey Lee Chay Khiong

Director

26 June 2018

KPMG LLP

16 Raffles Quay #22-00

Hong Leong Building

Singapore 048581

Telephone +65 6213 3388

Fax +65 6225 0984

Internet www.kpmg.com.sg

10

KPMG LLP (Registration No. T08LL1267L), an accounting limited liability partnership registered in Singapore under the Limited Liability Partnership Act (Chapter 163A) and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Independent auditors' report

Unitholders


(Constituted under a Trust Deed registered in the Republic of Singapore)

Report on the audit of the financial statements

Opinion

We have audited the financial statements of Phillip Treasury Fund (the “Fund”), which comprise

the Statement of Financial Position and Statement of Portfolios as at 31 March 2018, the

Statement of Total Return and Statement of Movement of Unitholders’ Funds for the year then

ended, and notes to the financial statements, including a summary of significant accounting

policies, as set out on pages FS1 to FS17.

In our opinion, the accompanying financial statements are properly drawn up in accordance with

the recommendation of Statement of Recommended Accounting Practice 7 “Reporting

Framework for Unit Trusts” issued by the Institute of Singapore Chartered Accountants so as to

present fairly, in all material respects, the financial position and portfolio holdings of the Fund as

at 31 March 2018 and the financial performance and movements in unitholders’ funds for the year

ended on that date.

Basis for opinion

We conducted our audit in accordance with Singapore Standards on Auditing (“SSAs”). Our

responsibilities under those standards are further described in the ‘Auditors’ responsibilities for

the audit of the financial statements’ section of our report. We are independent of the Fund in

accordance with the Accounting and Corporate Regulatory Authority Code of Professional

Conduct and Ethics for Public Accountants and Accounting Entities (“ACRA Code”) together

with the ethical requirements that are relevant to our audit of the financial statements in Singapore,

and we have fulfilled our other ethical responsibilities in accordance with these requirements and

the ACRA Code. We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our opinion.

Other information

Phillip Capital Management (S) Ltd, the Manager of the Fund (the “Manager”) is responsible for

the other information contained in the annual report. Other information is defined as all

information in the annual report other than the financial statements and our auditors’ report

thereon.

We have obtained all other information prior to the date of this auditors’ report.


Independent auditors’ report


11

Our opinion on the financial statements does not cover the other information and we do not

express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other

information and, in doing so, consider whether the other information is materially inconsistent

with the financial statements or our knowledge obtained in the audit or otherwise appears to be

materially misstated. If, based on the work we have performed, we conclude that there is a

material misstatement of this other information, we are required to report that fact. We have

nothing to report in this regard.

Responsibilities of the Manager for the financial statements

The Manager is responsible for the preparation and fair representation of these financial

statements in accordance with the recommendations of the Statement of Recommended

Accounting Practice 7 “Reporting Framework for Unit Trusts” issued by the Institute of Singapore

Chartered Accountants, and for such internal controls as the Manager determines is necessary to

enable the preparation of financial statements that are free from material misstatement, whether

due to fraud or error.

In preparing the financial statements, the Manager is responsible for assessing the Fund’s ability

to continue as a going concern, disclosing, as applicable, matters related to going concern and

using the going concern basis of accounting unless the Manager either intends to terminate the

Fund or to cease the Fund’s operations, or has no realistic alternative but to do so.

The Manager’s responsibilities include overseeing the Fund’s financial reporting process.

Auditors’ responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a

whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’

report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a

guarantee that an audit conducted in accordance with SSAs will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered

material if, individually or in the aggregate, they could reasonably be expected to influence the

economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with SSAs, we exercise professional judgement and maintain

professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and

obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one

resulting from error, as fraud may involve collusion, forgery, intentional omissions,

misrepresentations, or the override of internal controls.


Independent auditors’ report


12

Obtain an understanding of internal controls relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing

an opinion on the effectiveness of the Fund’s internal controls.

Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by the Manager.

Conclude on the appropriateness of the Manager’s use of the going concern basis of

accounting and, based on the audit evidence obtained, whether a material uncertainty exists

related to events or conditions that may cast significant doubt on the Fund’s ability to

continue as a going concern. If we conclude that a material uncertainty exists, we are

required to draw attention in our auditors’ report to the related disclosures in the financial

statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are

based on the audit evidence obtained up to the date of our auditors’ report. However, future

events or conditions may cause the Fund to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the financial statements, including

the disclosures, and whether the financial statements represent the underlying transactions

and events in a manner that achieves fair presentation.

We communicate with the Manager regarding, among other matters, the planned scope and timing

of the audit and significant audit findings, including any significant deficiencies in internal

controls that we identify during our audit.

KPMG LLP

Public Accountants and

Chartered Accountants

Singapore

26 June 2018


Financial statements


The accompanying notes form an integral part of these financial statements. FS1

Statement of Total Return


Phillip USD Money

Market Fund

Note 2018 2017

US$ US$

Income

Interest income 1,021,268 570,740

Less:

Expenses

Management fees 799,698 691,054

Trustee fee 49,985 43,193

Administration fee 69,980 60,471

Custody fee 9,997 8,639

Audit fee 8,268 8,244

Other expenses 22,679 48,979

960,607 860,580

Net gains/(losses) 60,661 (289,840)

Net gains or losses on value of investments

Net gain on investments 2,119,483 1,323,765

Net gain/(loss) on foreign exchange 8,280 (2,718)

2,127,763 1,321,047

Total return for the year before income tax 2,188,424 1,031,207

Less: Income tax 7 – –

Total return for the year after income tax

before distribution 2,188,424 1,031,207





Statement of Financial Position

As at 31 March 2018

Phillip USD Money

Market Fund

Note 2018 2017

US$ US$

Assets

Portfolio of investments 197,505,440 168,887,896

Receivables 3 2,305,911 2,268,319

Cash and cash equivalents 4 22,974,532 15,249,865

Total assets 222,785,883 186,406,080

Liabilities

Payables 5 3,375,859 1,369,814

Purchases awaiting settlement 7,389,343 917,606

Total liabilities 10,765,202 2,287,420

Equity

Net assets attributable to unitholders 6 212,020,681 184,118,660





Statement of Movements of Unitholders’ Funds


Phillip USD Money

Market Fund

Note 2018 2017

US$ US$

Net assets attributable to unitholders at the

beginning of financial year 184,118,660 156,823,356

Operations

Change in net assets attributable to unitholders

resulting from operations 2,188,424 1,031,207

Unitholders’ contributions/(withdrawals)

Creation of units 630,632,588 459,968,369

Cancellation of units (604,918,991) (433,704,272)

Change in net assets attributable to unitholders

resulting from net creation and cancellation of

units 25,713,597 26,264,097

Total increase in net assets attributable to

unitholders 27,902,021 27,295,304

Net assets attributable to unitholders at the

end of financial year 6 212,020,681 184,118,660





Statement of Portfolio

As at 31 March 2018

Holdings

as at

Fair value

as at

Percentage of

total net assets

attributable to

unitholders

as at

31/3/2018 31/3/2018 31/3/2018

US$ %

Phillip USD Money Market Fund

By Geography (Primary)

Quoted Debt Securities

Australia

Macquarie Bank Limited 2.63557% due

26/03/2019 6,000,000 6,000,000 2.83

6,000,000 2.83

British Virgin Islands

CNPC General Capital Limited 1.95% due

16/04/2018 4,850,000 4,848,448 2.29

Sinopec Capital 2013 Limited 1.875% due

24/04/2018 11,665,000 11,658,351 5.50

State Grid Overseas Investment 2013 Limited

1.75% due 22/05/2018 5,500,000 5,491,530 2.59

Want Want China Finance Limited 1.875% due

14/05/2018 8,000,000 7,989,280 3.77

29,987,609 14.15

Canada

Harvest Operations Corporation 2.125% due

14/05/2018 8,404,000 8,397,277 3.96

8,397,277 3.96

Cayman Islands

Baidu Incorporation 2.75% due 09/06/2019 1,435,000 1,429,891 0.67

Swire Pacific MTN Financing Limited 6.25%

due 18/04/2018 5,250,000 5,257,298 2.48

6,687,189 3.15






As at 31 March 2018

Holdings

as at

Fair value

as at

Percentage of

total net assets

attributable to

unitholders

as at

31/3/2018 31/3/2018 31/3/2018

US$ %



China

Agricultural Bank Of China Limited/Hong

Kong 2.875% due 10/12/2018 800,000 799,488 0.38

Agricultural Bank Of China Limited/New York

2.80213% due 21/05/2018 250,000 250,035 0.12

Agricultural Bank Of China Limited/Singapore

0% due 10/05/2018 10,000,000 9,977,594 4.71

Bank Of China Limited/Hong Kong 2.43457%

due 11/07/2019 5,000,000 5,001,850 2.36

Bank Of China Limited/Sydney 1.88%

19/04/2017 5,000,000 4,999,171 2.36

21,028,138 9.93

France

Intesa Sanpaolo 0% due 13/06/2018 10,000,000 9,953,032 4.69

9,953,032 4.69

Hong Kong

HKCG Finance Limited 6.25% due 07/08/2018 3,000,000 3,034,380 1.43

3,034,380 1.43

Japan

Japan Bank For International Cooperation

1.75% due 13/11/2018 8,000,000 7,968,800 3.76

7,968,800 3.76

Netherlands

Cooperative Rabobank UA/Hong Kong 0%

due 13/08/2018 10,000,000 9,927,756 4.68

9,927,756 4.68

Singapore

DBS Bank Limited 1.625% due 06/08/2018 400,000 398,724 0.19

398,724 0.19






As at 31 March 2018

Holdings

as at

Fair value

as at

Percentage of

total net assets

attributable to

unitholders

as at

31/3/2018 31/3/2018 31/3/2018

US$ %



South Korea

Export-Import Bank Of Korea 2.1534% due

01/11/2018 3,000,000 3,000,000 1.42

Export-Import Bank Of Korea 2.64363% due

26/05/2019 200,000 200,252 0.09

Korea Housing Finance Corporation 1.625%

due 15/09/2018 5,205,000 5,173,978 2.44

Korea Development Bank 2.875% due

22/08/2017 300,000 300,111 0.14

Korea Hydro & Nuclear Power Company

Limited 2.875% due 02/10/2018 1,100,000 1,099,307 0.52

Korea Western Power Company Limited

2.875% due 10/10/2018 450,000 449,739 0.21

SK Telecom Company Limited 2.125% due

01/05/2018 4,582,000 4,579,205 2.16

Woori Bank 2.875% due 02/10/2018 6,350,000 6,344,603 2.99

21,147,195 9.97


Total Debt Securities 125,279,790 59.09

Fixed deposits

Singapore

China Construction Bank 20,000,000 9.43

Credit Suisse AG 21,113,990 9.96

First Abu Dhabi Bank 5,000,000 2.36

Industrial and Commercial Bank of China

Singapore Branch 8,065,867 3.80

Sumitomo Mitsui Banking Corporation 5,000,000 2.36

Westpac Banking Corporation, Singapore

Branch 13,045,793 6.15

72,225,650 34.06

Total Fixed deposits 72,225,650 34.06

Portfolio of investments 197,505,440 93.15

Other net assets 14,515,241 6.85

Net assets attributable to unitholders 212,020,681 100.00






As at 31 March 2018

Fair value

as at

Percentage of

total net assets

attributable to

unitholders at

Percentage of

total net assets

attributable to

unitholders at

31/3/2018 31/3/2018 31/3/2017

Phillip USD Money Market Fund US$ % %

By Geography (Summary)

Australia 6,000,000 2.83 2.72

Bahamas – – 1.63

British Virgin Islands 29,987,609 14.15 5.07

Canada 8,397,277 3.96 3.40

Cayman Islands 6,687,189 3.15 6.35

China 21,028,138 9.93 5.14

France 9,953,032 4.69 –

Hong Kong 3,034,380 1.43 –

Japan 7,968,800 3.76 4.70

Netherlands 9,927,756 4.68 –

Singapore 72,624,374 34.25 42.21

South Korea 21,147,195 9.97 20.21

196,755,750 92.80 91.43

Accrued interest on debt securities 749,690 0.35 0.30

Portfolio of investments 197,505,440 93.15 91.73

Other net assets 14,515,241 6.85 8.27

Net assets attributable to unitholders 212,020,681 100.00 100.00






As at 31 March 2018

Fair value

as at

Percentage of

total net assets

attributable to

unitholders at

Percentage of

total net assets

attributable to

unitholders at

31/3/2018 31/3/2018 31/3/2017

Phillip USD Money Market Fund US$ % %

By Industry (Secondary)

Communications 6,009,096 2.83 4.39

Consumer, Non-cyclical 7,989,280 3.77 0.27

Diversified 5,257,298 2.48 3.47

Energy 24,904,076 11.75 4.21

Financial services 126,178,014 59.51 65.39

Government agency 16,343,030 7.71 6.05

Industrial – – 2.99

Utilities 10,074,956 4.75 4.66

196,755,250 92.80 91.43

Accrued interest on debt securities 749,690 0.35 0.30

Portfolio of investments 197,505,440 93.15 91.73

Other net assets 14,515,241 6.85 8.27

Net assets attributable to unitholders 212,020,681 100.00 100.00




FS9

Notes to the Financial Statements

These notes form an integral part of the financial statements.

1. Domicile and activities

Phillip Treasury Fund (the “Fund”) is an open ended umbrella unit trust constituted pursuant to a

Trust Deed dated 17 February 2009 together with its Amended and Restated Deeds thereon

(thereafter referred to as the “Trust Deed”) between Phillip Capital Management (S) Ltd (the

“Manager”) and BNP Paribas Trust Services Singapore Limited (the “Trustee”). The Trust Deed

is governed by and construed in accordance with the laws of the Republic of Singapore.

The Fund currently comprises one sub-fund, Phillip USD Money Market Fund (the “Sub-Fund”),

which was launched on 4 May 2009.

The investment objective of the Sub-Fund is to provide liquidity and manage risk while looking

to provide a return which is comparable to that of USD short-term deposits.

The Sub-Fund invests in high quality short-term money market instruments and debt securities.

Some of the investments may include government and corporate bonds, commercial bills and

deposits with financial institutions.

2. Significant accounting policies

2.1 Basis of financial statements preparation

The financial statements, expressed in United States Dollars, have been prepared under the

historical cost basis, as modified by the revaluation of investments, and in accordance with the

Statement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts”

issued by the Institute of Singapore Chartered Accountants.

On 1 April 2017, the Fund adopted the recommendations of revised RAP 7 (revised March 2017)

issued by the Institute of Singapore Chartered Accountants effective for the financial year

beginning 1 April 2017.

RAP 7 was revised in March 2017 to take into account, amongst others, the changes made to FRS

32 Financial Instruments: Presentation and FRS 107 Financial Instruments: Disclosures in

relation to the offsetting of financial assets and liabilities; and new standards issued after 2012

including FRS 110 Consolidated Financial Statements, FRS 112 Disclosure of Interest in Other

Entities and FRS 113 Fair Value Measurement. RAP 7 (Revised March 2017) (“Revised RAP

7”) is applicable to unit trusts with annual periods beginning on or after 1 July 2016. The adoption

of the Revised RAP 7 did not result in any significant changes to the accounting policies of the

Trust and had no material effect on the amounts reported for current or prior financial years.

For the purposes of preparation of these financial statements, the basis used for calculating the

expense ratio and turnover ratio are in accordance with the guidelines issued by the Investment

Management Association of Singapore (“IMAS”) and the Code on Collective Investment

Schemes under the Securities and Futures Act (Cap 289) (“Code”) respectively.




FS10

2.2 Basis of valuation of investments

Quoted investments are stated at fair value based on the bid prices at the reporting date.

Unrealised gains/losses on investments are represented by the difference between the fair value

and the carrying value of investments and are recognised in the Statement of Total Return.

Realised gains and losses upon disposal of investments are computed on the basis of the difference

between the carrying value and the selling price of investments on trade date and are taken to the

Statement of Total Return.

2.3 Recognition of income

Dividend income is recognised when declared and is stated gross of tax credits.

Interest income is recognised as it accrues in the Statement of Total Return using the effective

interest method.

2.4 Foreign currency translation

Transactions in foreign currencies are translated at the exchange rate at the date of transaction.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are

translated at exchange rates at the reporting date. All exchange differences are recognised in the

Statement of Total Return.

2.5 Cash and cash equivalents

Cash and cash equivalents comprise bank balances and amount held with broker. Cash

equivalents are short-term highly liquid investments that are readily convertible to known

amounts of cash and are subject to an insignificant risk of changes in value.

2.6 Net assets attributable to unitholders

Net assets attributable to unitholders are classified as equity.

3. Receivables Phillip USD Money

Market Fund

2018 2017

US$ US$

Receivable from unitholders for creation of units 2,111,465 2,103,019

Accrued interest receivable 194,446 165,300

2,305,911 2,268,319




FS11

4. Cash and cash equivalents

Phillip USD Money

Market Fund

2018 2017

US$ US$

Cash and bank balances 8,921,190 11,240,572

Amount held with broker 14,053,342 4,009,293

22,974,532 15,249,865

5. Payables

Phillip USD Money

Market Fund

2018 2017

US$ US$

Payable to unitholders for cancellation of units 3,235,686 1,192,701

Accrued expenses 140,173 177,113

3,375,859 1,369,814

6. Units in issue

During the year the numbers of share issued, redeemed and outstanding are as follows:

Phillip USD Money

Market Fund

2018 2017

US$ US$

Units at beginning of the year 174,721,629 149,708,710

Units created 594,742,022 437,729,610

Units cancelled (570,459,433) (412,716,691)

Units at end of the year 199,004,218 174,721,629

Net assets attributable to unitholders – US$ 212,020,681 184,118,660

Net asset value per unit – US$ 1.0654 1.0538

For subscriptions and redemptions and for various fee calculations, investments are stated at the

last traded price/amortised cost on the valuation day for the purpose of determining net asset value

per unit while for reporting purpose, the investments are valued at the relevant bid market prices

as at the reporting date.




FS12

The effect of bid market prices/amortised cost in the net assets attributable to unitholders is as

follows:

Phillip USD Money

Market Fund

2018 2017

US$ US$

Net assets attributable to unitholders per unit per financial

statements 1.0654 1.0538

Effect of adopting amortised cost per unit 0.0007 0.0005

Net assets attributable to unitholders per unit for

issuing/redeeming 1.0661 1.0543

7. Income tax

The Fund was approved for the Enhanced-Tier Fund Tax Incentive Scheme under Section 13X

of the Income Tax Act by the Monetary Authority of Singapore (“MAS”) with effect from 16

August 2010. The tax exemption status will be for the life of the Fund, provided the Fund

continues to meet all the terms and conditions set out by MAS and the relevant Income Tax

legislations.

8. Financial risk management

The Sub-Fund’s activities expose it to a variety of market risks (including price risk, interest rate

risk and currency risk), liquidity risk and credit risk. The Sub-Fund’s overall risk management

programme seeks to minimise potential adverse effects on the Sub-Fund’s financial performance.

The Sub-Fund may use financial derivative instruments, subject to the terms of the Trust Deed,

to moderate certain risk exposures. Specific guidelines on exposures to individual securities and

certain industries are in place for the Sub-Fund at any time as part of the overall financial risk

management to reduce the Sub-Fund’s risk exposures.

a) Market risks

Market risk is the risk of potential adverse change to the value of financial instruments because

of changes in market conditions such as interest rate movements and volatility in securities’

prices. The Manager manages the Sub-Fund’s exposure to market risk through the use of risk

management strategies and various analytical monitoring techniques.

i Price risk

Price risk is the risk that the fair values of equities or future cash flows of a financial instrument

will fluctuate because of changes in market prices (other than those arising from interest rate risk

or currency risk).

The investments of the Sub-Fund are subject to normal market fluctuations and the risks inherent

in investing in securities markets and there can be no assurance that appreciation will occur. It is

the policy of the Manager to maintain a diversified portfolio of investments so as to minimise the

risk.




FS13

ii Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes

in market interest rates.

The tables below summarise the Sub-Fund’s exposure to interest rate risks. They include the Sub-

Fund’s assets and trading liabilities at fair value, categorised by interest rate types.

Fixed rate

Floating

rate

up to

1 year 1-5 years

Non-interest

bearing Total

US$ US$ US$ US$ US$

2018

Assets

Portfolio of investments 14,452,137 180,873,722 1,429,891 749,690 197,505,440

Receivables – – – 2,305,911 2,305,911

Cash and bank balances 14,053,342 – – 8,921,190 22,974,532

28,505,479 180,873,722 1,429,891 11,976,791 222,785,883

Liabilities

Payables – – – 3,375,859 3,375,859

Purchases awaiting

settlement – – – 7,389,343 7,389,343

– – – 10,765,202 10,765,202

2017

Assets

Portfolio of investments 3,000,000 145,545,269 19,798,197 544,430 168,887,896

Receivables – – – 2,268,319 2,268,319

Cash and bank balances 4,009,293 – – 11,240,572 15,249,865

7,009,293 145,545,269 19,798,197 14,053,321 186,406,080

Liabilities

Payables – – – 1,369,814 1,369,814

Purchases awaiting

settlement – – – 917,606 917,606

– – – 2,287,420 2,287,420

The duration, a measure of the sensitivity of the price of a fixed income security to a change in

interest for the 12 month period is as disclosed below. As of 31 March, should interest rates rise

or lower by 1% with all other variables remaining constant, the increase/decrease in net assets

attributable to unitholders would be as follows:

Interest rates rise/lower

by 1%

Increase/(Decrease) in net

assets attributable to

unitholders

2018 2017

US$ US$

Increase in net assets attributable to unitholders 266,345 614,955




FS14

iii Currency risk

The Sub-Fund’s assets and liabilities are held mainly in United States Dollars, which is also its

functional currency, therefore no sensitivity analysis and currency exposure table are presented.

In addition, the Sub-Fund invests in underlying securities which are denominated in its functional

currency where the fluctuations in the relevant exchange rates would not have an impact on the

income and value of the Sub-Fund.

b) Liquidity risk

The Sub-Fund is exposed to daily redemption of units in the Sub-Fund. Therefore the majority

of its assets are invested in investments that are traded in an active market and can be readily

disposed off.

c) Credit risk

Credit risk is the risk that a counterparty will fail to perform contractual obligations, either in

whole or in part, under a contract.

The main credit risk to which the Sub-Fund is exposed arises from the Sub-Fund’s investments

in debt securities. The Sub-Fund is also exposed to counterparty credit risk on cash and bank

balances and other receivable balances.

The Sub-Fund invests mostly in financial assets, which have an investment grade as rated by

international credit rating agencies.

All transactions in listed securities are settled/ paid upon delivery using approved brokers. The

risk of default is considered minimal, as delivery of securities is only made once the Sub-Fund

has received payment. Payment is made on a purchase once the securities have been received by

the Sub-Fund. The trade will fail if either party fails to meet its obligation.

The table below analyses the Sub-Fund’s debt investments by credit ratings.

Debt securities by rating category

Percentage of

total net assets

attributable to

unitholders as at

31 March 2018

%

Percentage of

total net assets

attributable to

unitholders as at

31 March 2017

%

AAA – 1.37

AA 4.71 18.02

A 28.89 21.58

Aaa* 0.19 0.22

Aa* 4.06 4.37

A3* 4.44 5.19

NR 16.45 5.53

Total 58.74 56.28


* Credit rating is from Moody’s




FS15

Fixed deposits by rating category

Percentage of

total net assets

attributable to

unitholders as at

31 March 2018

%

Percentage of

total net assets

attributable to

unitholders as at

31 March 2017

%

A 15.60 11.44

AA- 8.50 6.01

A- – 1.09

A- # 9.96 –

Aa3* – 7.60

NR – 9.30

Total 34.06 35.44


* Credit rating is from Moody’s # Credit rating is from Fitch

d) Fair value estimation

Except for investments which are measured at fair value, at 31 March 2018 and 2017, the fair

values of assets and liabilities approximate their carrying values on the Statement of Financial

Position due to the short period to maturity.

The fair value of financial assets and liabilities traded in active markets (such as publicly traded

securities) are based on quoted market prices at the close of trading on the reporting date. The

quoted market price used for financial assets held by the Sub-Fund is the current bid price; the

appropriate quoted market price for financial liabilities is the current asking price.

The Sub-Fund classifies fair value measurements using a fair value hierarchy that reflects the

significance of the inputs used in making the measurements. The fair value hierarchy has the

following levels:

Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).

Inputs other than quoted prices included within level 1 that are observable for the asset or

liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).

Inputs for the asset or liability that are not based on observable market data (that is,

unobservable inputs) (Level 3).

The following table analyses within the fair value hierarchy the Sub-Fund’s financial assets and

liabilities (by class) measured at fair value at 31 March 2018 and 2017:

Phillip USD Money

Market Fund Level 1 Level 2 Level 3 Total

US$ US$ US$ US$

2018

Assets

Debt securities – 125,279,790 – 125,279,790

Fixed deposits – 72,225,650 – 72,225,650

– 197,505,440 – 197,505,440




FS16

2017

Assets

Debt securities – 103,630,777 – 103,630,777

Fixed deposits – 65,257,119 – 65,257,119

– 168,887,896 – 168,887,896

9. Related party transactions

In the normal course of business of the Sub-Fund, management fees and trustee fees have been

paid or are payable to the Manager and the Trustee respectively as noted in the Statement of Total

Return.

In addition, the bank holding company and related parties of the Trustee have also provided

custodian, banking, foreign exchange, fund administration and brokerage services to the Sub-

Fund in the normal course of business at terms agreed between the parties and within the

provisions of the Trust Deed.

The Manager also uses the services of related parties to carry out transactions involving the

purchase and sale of securities.

Other than as disclosed elsewhere in the financial statements, the following significant

transactions took place between the Sub-Fund and its related parties during the year:

Phillip USD Money

Market Fund

Note 2018 2017

US$ US$

Cash and cash equivalents held with a related party of

the Trustee 4 8,921,190 11,240,572

10. Financial ratios Phillip USD Money

Market Fund

2018 2017

Expense Ratio

Total operating expenses US$ 960,607 860,580

Average daily net asset value US$ 199,934,924 172,862,954

Expense ratio (Note 1) % 0.48 0.50

Turnover Ratio

Lower of total value of purchases or sales US$ – 1,007,759

Average daily net asset value US$ 199,934,924 172,862,954

Turnover ratio (Note 2) % – 0.58




FS17

Note 1: The expense ratio has been computed based on the guidelines laid down by the IMAS.

The calculation of the expense ratio is based on total operating expenses divided by the

average net asset value for the year. The total operating expenses do not include (where

applicable) brokerage and other transaction costs, performance fees, interest expenses,

distributions paid out to unitholders, foreign exchange gains/losses, front or back end

loads arising from the purchase or sale of other funds and tax deducted at source or

arising out of income received. The Sub-Fund does not pay performance fee. The

average net asset value is based on the daily balances.

Note 2: The turnover ratio is calculated in accordance with the formula stated in the Code. The

calculation of the turnover ratio is based on the total value of purchases (or sales) of the

underlying investments divided by the weighted average daily net asset value. Total

value of purchases (or sales) does not include brokerage and other transaction costs. The

total value of bonds matured during the year is not included in the computation of

portfolio turnover ratio.


FS18

IMPORTANT INFORMATION Phillip USD Money Market Fund (the “Sub-Fund”) is a sub-fund of Phillip Treasury Fund (the “Fund”), an open-ended umbrella unit trust authorised under the Securities and Futures Act, Chapter 289, by the Monetary Authority of Singapore. This document is published by Phillip Capital Management (S) Ltd, the manager of the Fund (the “Manager”), for information only and it does not constitute a prospectus nor form part of any offer or invitation to subscribe for or to purchase, or solicitation of any offer to subscribe for or to purchase, any units in the Fund. All applications for units in the Fund must be made on the application forms accompanying the latest prospectus of the Fund (the “Prospectus”). The information and opinions contained in this document have been obtained from public sources which the Manager believes to be reliable and accurate. However, no representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information and it should not be relied upon as such. Opinions included herein constitute the judgement of the Manager at the time specified and may be subject to change without notice, they are not to be relied upon as authoritative or taken in substitution for the exercise of judgment by any recipient and are not intended to provide the sole basis of evaluation of any investment. Neither the Manager nor the Fund, nor any of their respective associates, directors, officers or employees, accepts any liability whatsoever for any loss arising directly or indirectly from any use of this document or any information contained herein. Given the economic and market risks, there can be no assurance that the Fund will achieve its investment objectives. Investments in the Fund are not deposits or other obligations of, or guaranteed, or insured by the Manager or the distributors or their affiliates and are subject to investment risks, including the possible loss of the full principal amount invested. Returns may be affected by, among other things, the investment strategies or objectives of the Fund and material market and economic conditions. The value of the units and the income from them can fall as well as rise. Past performance is not necessarily indicative of the future performance of the Fund. This document should not be taken as a recommendation to buy or sell since it does not take into account the specific investment objectives, financial situation and the particular needs of any particular recipient of this document. Investors should seek advice from a financial advisor before purchasing units in the Fund. In any case, investors should read the Prospectus and consider the risks as well as suitability of the Fund before deciding whether to subscribe for units in the Fund. Copies of the Prospectus are available and may be obtained from the Manager.

Documents

PHILLIP TREASURY FUND Annual Report Year ended 31 … · 2 days ago · Statement of Total Return FS1 Statement of Financial Position FS2 ... Portfolio of investments 197,505,440